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Breaches of international contracts and compensation terms

In addition to breach of contract, some of the important aspects of an international contract (Read here) are the unpredictable cultural, social, political, and legal events that happen after the drafting of the agreement and that may occur in one of the countries where one of the contracting parties resides. These unpredictable events can change the legal balance on which a contract is based. For this reason, international commercial law provides for hardship clauses and force majeure.

The purpose of the hardship clause is to remedy cases in which a contract becomes no longer economically convenient, but performance can still be ensured.

The force majeureclause concerns an unforeseeable or unexpected event, which makes one of the contractual provisions absolutely impossible to be performed. A typical clause of force majeure is called ‘acts of God’ and provides protection against natural, accidental or unexpected events, such as wars, riots, strikes, labour or raw material shortages, which may alter the contract. The force majeure clause is therefore broad and should be negotiated with great caution in spite of the fact that it is a boilerplate clause, which is always present in the general terms and conditions templates of an international contract (read more International contract templates)

The price revision clause

In general, also the price of an international contract is fixed or stable. However, depending on the cases, it may be necessary to determine in advance the possible modification of an agreed price due to unforeseen circumstances that may occur after the conclusion of the contract

The penalty clause to liquidate damages

It makes it possible to obtain compensation for damage suffered as quantified in advance, without prejudice to the possibility of filing a lawsuit for the compensation of any additional damage suffered.

Demand guarantees

To ensure the performance of a contract, guarantee is often requested. It is separate from the contract and is aimed at guaranteeing the contract that the parties are entering into. Guarantees are issued by third parties, banks and insurance companies. The guarantor ensures in any case fulfilment of the contractual obligations, without any need for the secured party to provide proof of the failure of performance, provided that the conditions set forth in the text of the guarantee are met. The typical purpose of a demand guarantee, or bond, is that of a security deposit in cash, in order to provide the beneficiary with fast and easy access to monetary compensation in the event of non-performance by the counterparty.

The clause for the identification of the national law applicable to the contract and the choice of jurisdiction

The Damiani & Damiani International Law Firm assists its clients in selecting the most suitable contractual clauses to govern their international contract. Explain your case and ask for advice from the Damiani&Damiani International Law Firm

Roberto Conigliaro

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